2014 (7) TMI 1198 - HC - Indian Laws

Court rules branches of the same establishment share a code under EPF Act. Integrality key for determining a single establishment.

M/s. Milan Biri Factory & Ors. Versus The Regional Provident Fund Commissioner, W.B. & Ors.

The court held that the allotment of a new code for the Tungidighi unit was unsustainable as all branches and units, whether in the same or different ... Applicability of Employees Provident Fund and Miscellaneous Provisions Act, 1952 to the Tungidhighi unit - Extension of provisions of the Act - allotment of a new separate Code to the Tungidhighi unit - Establishment of the petitioners has failed to remit the provident fund, employees pension funds and insurance funds dues under the newly allotted P.F. Code - Held that:- the factory situated in different places and having separate licences but same registered office, activities, Managing Director vis-à-vis Manager and Secretary empowered to operate Bank Account of both and Balance Sheet, Income and Expenditure Account common to both would be as treated as part of the same establishment. To decide whether different units are part of the same establishment, the Court has to assess the extent of functional integrity between them and also whether one unit can exist conveniently and reasonably without the other. An establishment would include all departments and branches and if the two units are put together as a single establishment, the Act would be applicable and otherwise not. The authorities concerned did say that the said unit is a separate and independent of the principal establishment. It is also not being contended that there is no financial management and functional integrality between the factory and the main establishment. If there is financial, management and functional integrality between the different units and one cannot exist without the other they should be treated as one single unit. Therefore, the allotment of a new Code in respect of the said unit Tungidighi is unsustainable. However, it is made clear this order shall not prevent the Provident Fund Authorities from realizing the dues of the said unit in accordance with law, if it is found that the said unit has not complied with the statutory requirements. It is made clear that this Court has not gone into the merits of the order passed under Section 7A of the said Act in relation to the Tungidighi unit of the petitioner No.1. All consequential steps taken pursuant to allotment of such code number is accordingly set aside. - Writ application disposed of Issues Involved1. Allotment of a new separate Provident Fund Code for the Tungidighi unit.2. Applicability of Section 2A of the Employees Provident Fund and Miscellaneous Provisions Act, 1952.3. Determination of the liability and compliance of statutory requirements by the Tungidighi unit.4. Validity of the proceedings under Section 7A of the said Act.Detailed AnalysisAllotment of a New Separate Provident Fund Code for the Tungidighi UnitThe petitioners are engaged in manufacturing beedi and are covered under the Employees Provident Fund and Miscellaneous Provisions Act, 1952, by a registered coverage letter issued on November 26, 1986. Their establishment includes various departments and branches across the state, all under the Provident Fund Code No.WB/25008. However, the Regional Provident Fund Commissioner's Sub-Regional Office issued a new separate code (Code No. WB/SLG/30491) for the Tungidighi unit on January 31, 2000. The petitioners objected to this new code, arguing that their establishment, including all branches and units, should be treated as a single entity under the original code.Applicability of Section 2A of the Employees Provident Fund and Miscellaneous Provisions Act, 1952The petitioners contended that according to Section 2A of the Act, all branches and units, whether situated in the same place or different places, are part of the same establishment. Therefore, the Tungidighi unit should not be allotted a separate code. They relied on the decision in Belal Biri Factory vs. Regional P.F. Commissioner, where it was recognized that for the applicability of the Act and determination of total dues, all departments and branches are treated as part of the principal establishment.Determination of the Liability and Compliance of Statutory Requirements by the Tungidighi UnitThe petitioners argued that all dues for the Tungidighi unit from December 1999 to April 2000 had been centrally deposited, and no amount was due. Despite their representation and objection, the authorities proceeded to realize dues under the new code. The petitioners maintained that the Tungidighi unit is part of the same establishment and should not be treated separately for Provident Fund purposes.Validity of the Proceedings under Section 7A of the Said ActThe authorities initiated proceedings under Section 7A of the Act, alleging that the petitioners failed to remit provident fund dues under the newly allotted code. The petitioners argued that the Act's provisions should not be extended separately to the Tungidighi unit, as it is part of the same establishment covered by the original code.JudgmentThe court held that the allotment of a new code for the Tungidighi unit is unsustainable. Section 2A clarifies that all branches and departments of an establishment, whether situated in the same place or different places, are part of the same establishment. The court referenced multiple precedents, including Regional Provident Fund Commissioner, Jaipur vs. Naraini Udoyog and Noor Nivas Nursery Public School vs. Regional Provident Fund Commissioner, to support this interpretation.The court noted that the authorities did not contend that the Tungidighi unit was separate and independent of the principal establishment. It emphasized the importance of financial, management, and functional integrality between units to determine if they constitute a single establishment.The court set aside the allotment of the new code and all consequential steps taken pursuant to it. However, it allowed the Provident Fund Authorities to determine the liability of the Tungidighi unit for the period from December 1999 to April 2000 and to impose penalties and damages if there was an admitted default.The writ application was allowed to the extent mentioned, and the application was disposed of without any order as to costs.